Should My 80-Year-Old Dad and 65-Year-Old Mom Turn Their $687,000 Nest Egg Into an Annuity? ‘I Don’t Think They Realize How Much They’re Spending’

Reddit user asked a question to the home to many families trying to help their elderly parents to move in retirement: Is it logical to buy annual installments?

Putting the post everything. Their father is 80 years old. My mother is 65 years old. I got about $ 687,000 in investments and about $ 69,000 of annual income of social security and pension. The user looked at them to follow the withdrawal method of changing percentage – as it takes about 5.1 % of the wallet every year. This would give them about $ 85,000 of income annually, which must cover $ 75,000 in annual expenditures.

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However, they were not completely convinced. They said about their mother, who believed that their pension will spend normally: “I do not trust that she really understands how much they spend.” So the user started looking at pensions. Fixed income, guaranteed for life? Less surprises? It seemed attractive, especially for parents who have such a large age gap. They were fine with the idea that it might use most of the money. “Yes, they will not leave anything for us when they pass, but it will be divided into six ways in any case,” they wrote.

This type of honesty has sparked many responses. Some suggested that the VPW method is still working. Others rushed to offer the rates of installments, which increased in mid -2015. Many of them said that fixed pensions were now paying more than 5 %, as the pensions imposed for the older buyers offer. This is where mathematics begins.

The original publication did not specify exactly how much they are thinking about converting it, but let’s say that the parents decided to put $ 500,000 on an immediate subscribed annual. Based on current market prices, this can generate about $ 2,350 to $ 2,500 per month, or approximately 28,000 dollars to $ 30,000 a year. Add this to the current $ 69,000 of social security and the income of pensions, and its total annual income can fly about 97,000 dollars to 99,000 dollars.

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But once the pension is committed, these funds are closed. It is not available for emergency situations, unexpected medical costs, or any large expenses for one time. If they choose to protect inflation, then the monthly drop in the initially against the gradual increases at a later time. Unless they add two specific passengers, there is usually no money for the heirs. For retirees who focus on guaranteed income and less daily decisions, it may be worth the preference. But for others, losing flexibility – especially with a large part of savings – can be a great sacrifice.